IL&FS, Islamic Development Bank target Africa with $1bn infra fund

The pair are aiming to catalyse private sector investment following Shariah-compliant principles with the first-of-its-kind vehicle.

Indian private equity group IL&FS Investment Managers has joined forces with the private sector arm of the Islamic Development Bank Group to launch a $1 billion African infrastructure fund.

The agreement to establish the fund was signed in Saudi Arabia this week and will look to accelerate private sector investment in African infrastructure. The duo said the fund will look to finance small to mid-sized infrastructure projects, covering the healthcare, transportation, utilities, power and telecom industries.

They also said the fund will be a first-of-its-kind in following Shariah financing principles. A report released by the World Bank last year said further efforts were needed to familiarise Islamic finance structures for infrastructure PPP projects and at a conference held this month, Islamic finance was described as a “relatively untapped market”, according to Sara Ahmed, an operations analyst for the World Bank Group.

“[The fund brings] a vision of providing demonstrable development impact through private sector intervention in the much-needed infrastructure sector in Africa,” said Khaled Al Aboodi, chief executive of the Islamic Corporation for the Development of the Private Sector. “This fund leverages on ICD’s current direct financing and investment strategy in this sector for a multiplier effect through partnership with private sector investors/LPs participating in the fund.”

The vehicle is the latest significantly sized fundraising effort targeting African infrastructure. A group of Danish pensions provided $650 million in August last year to AP Moller Capital’s Africa Infrastructure Fund, ahead of a $1 billion target. South Africa-based Antswisa Private Equity launched its own $1.5 billion fundraising effort the following month. New Sparta Asset Management has also begun fundraising for its New Sparta Africa Renewable Power Fund, eyeing $250 million from investors.